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Thursday, May 25, 2006

Schwarzenegger friend's fate still on hold

After a contentious, two-hour hearing of the Senate Rules Committee, the political fate of one of Gov. Arnold Schwarzenegger's closest advisers remains up in the air.

David Crane, Schwarzenegger's top economic adviser and close personal friend, was grilled by Democrats Wednesday, who questioned Crane about his close relationship with the governor and his credentials to serve on the powerful CalSTRS board. The board directs the investment of billions of dollars in teacher pensions.

In a surprise move, Crane testified that he was willing to give up his post as economic adviser if he were confirmed to the board. The decision, which Crane informed Senate President Pro Tem Don Perata, D-Oakland, of yesterday, caught the pro tem off guard, causing him to postpone a vote until next week.

"I was absolutely convinced that he was conflicted," said Perata after the hearing. "I told him I thought he should stay as the governor's adviser on economics. … I think it is a curious choice and I don't understand it."

Crane, a Democrat, was first appointed to the CalSTRS board by Schwarzenegger last July, and this is now the fourth time he has had his confirmation vote postponed. Members can serve on the board for up to one year without Senate confirmation.

Two other sitting Schwarzenegger-appointed CalSTRS trustees, Kathleen Brugger and Elizabeth Rogers, were unanimously confirmed to the board Wednesday.

At the hearing, Crane, who was joined by Schwarzenegger Legislative Secretary Richard Costigan, faced tough questions from Sen. Debra Bowen, D-Marina del Rey, about his perspective on the role of a STRS board member. The central bone of contention was Crane's stance on a potential shift to defined- contribution pensions, a move that is anathema to many Democrats and their union backers.

At one point, Bowen chastised Crane for having "a very head-in-the-sand approach."

Crane sidestepped most of the questions on his pensions philosophy, saying it was up to the elected Legislature to make such decisions. "I am agnostic on the issue," Crane said, though he supported the governor's pension reforms in 2005 and has called defined benefits a "special privilege."

Earlier this year, Crane was one of only two votes that did not oppose a proposal by Assemblyman Keith Richman, R-Northridge, that would have shifted the state away from defined-benefit public pensions.

Crane received the open support from both of the Republican members of the Rules Committee, Sen. Jim Battin, R-La Quinta, and Sen. Roy Ashburn, R-Bakersfield.

"If you are not qualified to do it, I don't know who is," said Ashburn. But a parade of union and teacher groups, including SEIU, the California Teachers Association, and the California Federation of Teachers, testified in disagreement.

"He makes people nervous and unsettled and I number myself in that category," said Perata.

Crane needs the support of at least one Democrat, either Bowen, Perata, or Sen. Gil Cedillo, D-Los Angeles, to move forward in the confirmation process.

CalSTRS trustees first became a political hot potato last year, when Schwarzenegger was pushing his special-election reform package. The package originally included shifting state pensions from a defined-benefit system, where retirees are guaranteed a certain sized paycheck, to defined contribution, where they receive payments based on the amount they contributed.

But Schwarzenegger's proposal was dealt a setback when the 12-member CalSTRS board of trustees rejected the proposal, with the only dissenting votes coming from then-Director of Finance Tom Campbell and Schwarzenegger-appointed trustee Kathleen Smalley.

Schwarzenegger responded by yanking the rest of his appointees off the board. The Senate retaliated by rejecting Smalley's confirmation.

Perata characterized last year's pension battle as "an outright assault on public employees" and added that "the specter of that has not yet passed". Crane, along with the Brugger and Rogers, were appointed to replace the removed trustees.

Perata concluded the hearing saying that Crane is "still wearing the same colors" as the governor and carrying his flag, with out without a post in the Horseshoe, complicating the newly politicized pension board appointment. The Rules committee meets again next Wednesday.